StorCentric files for Chapter 11 bankruptcy
Rapid acquisitions followed by supply chain issues stemming from the COVID-19 pandemic led StorCentric to file for Chapter 11 bankruptcy in an effort to restructure.
COVID-19-related issues are squeezing storage conglomerate StorCentric as it seeks to reorganize the company and look for a buyer for its business.
On June 20, StorCentric filed for Chapter 11 bankruptcy protection, according to a petition filed in northern California's U.S. Bankruptcy Court. In a separate petition filed the same day, Drobo, the external storage company that is part of StorCentric, also filed for Chapter 11 bankruptcy protection. The extent of the reorganization is unclear, but in a statement StorCentric said it plans to continue providing service to customers.
"I was saddened, but not surprised, to hear about the StorCentric bankruptcy," said Christopher Steffen, an analyst at Enterprise Management Associates.
He added that StorCentric acquired several companies before the COVID-19 pandemic. When supply chain issues hit, the company didn't have time to effectively cobble its acquisitions together.
The supply chain issues appear to have affected StorCentric early in the pandemic. In a March 2020 blog post by CEO Mihir Shah, StorCentric leadership suggested the pandemic and its effects on the supply chain were negatively affecting its business.
By July 2021, the pandemic had taken "a devastating impact on the company's business," shutting down its assembly and integration facility, according to the Chapter 11 first-day declaration statement. In the first quarter of 2022, several special purpose acquisition companies approached StorCentric for a potential acquisition, going so far as signing a letter of intent before the funding fell through.
The Chapter 11 filing also stated that StorCentric was seeking to "effectuate an eventual sale of their businesses."
Not just supply chain issues
But StorCentric's problems may have been broader than COVID-19. The company is an unusual storage vendor, according to Dave Raffo, an analyst at Evaluator Group. It launched in 2018 by merging Nexsan, a midrange storage vendor, and Drobo, an external storage vendor, into a single holding company.
Then it went on a buying spree, acquiring vendors that were already struggling, including all-flash storage vendor Violin in October 2020, which had filed for Chapter 11 bankruptcy in 2016. It also acquired Vexata, an early NVMe storage player, as well as Retrospect in 2019.
"It was like a Frankenstein monster made up of separate parts," Raffo said.
Echoing Steffen, Raffo said that with such different parts, it isn't a surprise the company didn't work out, but he noted that the filing suggests StorCentric is looking for a buyer rather than folding the company.
Steffen said he hopes the bankruptcy declaration puts the company on a better path.
"StorCentric continues to be a leader in the small-to-medium enterprise storage space, and I hope the bankruptcy restructuring allows them the time and flexibility needed to catch their breath and position themselves for the next evolution of their company," he said.